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London Forex Report: Crude Below $40 Loonie Above 1.35

London Forex Report

Crude below $40 Loonie above 1.35, oil prices continued to plunge for the second consecutive day, triggered by disappointment driven by OPEC member countries failing to address the protracted supply glut. WTI fell 5.8% to $37.7/ barrel while Brent crude lost 5.3% to $40.7/ barrel. USD extended its rebound to strengthen against all G10 FX majors, amid a return of safe haven demand going into US trading. The USD Index climbed 0.31% higher to 98.65, recouping mildly the losses suffered before the weekend.

Fundamental: USD rallied against EUR on expectations that the Fed is on track to raise interest rates next week following a solid non-farm report. Euro dropped 0.4 percent to 1.0843 due to the strengthening dollar. EURUSD price action has settled down dramatically compared to last Thursday’s trade, and consolidation around 1.0850 handle is currently being witnessed. Today we will have European third quarter GDP.

Technical: While 1.0790 caps intraday downside corrections expect a grind higher to retest last weeks high. A failure at 1.0790 opens a retest of 1.0725 next

Fundamental: GBP extended its pullback from two-week highs reached last Thursday while the USD strengthened across the board amid growing prospects that the Fed will raise rates next week. Ahead of the Fed’s meeting, the Bank of England will decide on monetary policy this Thursday, however, no changes are expected by markets.

Technical: While 1.5050 supports intraday downside corrections expect a move to test symmetry resistance at 1.5200/10. A failure at 1.5050 opens a retest of last weeks 1.4890’s lows

Fundamental: The USD edged up about 0.1 percent to 123.32 against JPY while the surge of USD was limited by a drop in US Treasuries yields. The USDJPY one week ATM option volatility remained at a low level of 5.6 showing that range-bounded trade of JPT may persist.

Technical: While 122.50/30 supports downside reactions, market structure remains bullish to test 2015 highs next. A failure at 122 opens a test of 121.40 support next ahead of pivotal 120.

Fundamental: Final reading of 3Q GDP confirmed the Japan economy avoided a technical recession. The economy expanded more than expected, led by a directional turn in household spending, overshadowing weaker public investment. The climbs in leading and coincident indices also suggest growth in the Japanese economy is expected to pick up in the next 3-6 months.

Technical: While 134.80 caps upside reactions expect a retest of 132.50 from above to set the platform for another corrective leg higher.

Fundamental: AUD was hit hard overnight following some hawkish rhetoric from Fed official Lockhart saying that the conditions for higher rates had been achieved. The weakening iron prices have also put some downward pressure on AUDUSD, which is trading at around 72.30 US cents. Australia’s NAB Business Confidence posted a better-than-expected reading of 5, which helped provide some initial support to AUD.

Technical: Breach of .7270 supports suggests a move to test the recovery base and broken descending trend line towards .7100, a failure here would suggest a retest of 2015 lows.

Fundamental: WTI oil prices once again dropped below $40 after the decision of the OPEC to keep crude production at a high level. Against a stronger greenback overnight, USDCAD pushed through major psychological level of 1.3500. In face of weakening oil prices and diverging monetary policy stance with the Fed, markets will be looking for hints from BoC Governor Poloz’s speech tomorrow in regards to the central bank’s future monetary policy

Technical: Bulls have the ball while 1.3450 supports intraday downside expect a grind higher to test stops above 1.3600. A close below 1.3389 would ease the near term bullish bias and suggest a correction is underway.